It's time to be the bad news police: “Most of what you try will fail.”
That is, if you’re really trying to do something new, daring, and innovative.
But if you go into your new business, product line, or geography knowing that, then you’re better equipped to respond to the challenges which may arise.
(Otherwise, you could be a deer in headlights...Not a model for the most agile business leader.)
In visual form, it looks like this:
So, my fellow Entrepreneurs for Impact...stay focused on your goal, but remember that patience is a virtue, and perseverance is what often separates those who experiment and those who make big impacts.
Wait...If all investments have impact, then why is impact investment different?
(And also, “How much wood could a woodchuck chuck if a woodchuck could chuck wood?”)
In a recent MIT article, impact investing is defined as “the practice of investing in companies, organizations, and funds with the intention of generating not just financial returns, but measurable social and environmental impact as well.”
While impact investing has been around in various forms for several decades, it is quickly moving into the mainstream investor’s toolkit.
Back in the day, it was SRI, or Socially Responsible Investment, and it was about negative screening, or eliminating stocks such as cigarettes, alcohol, and firearms from investment portfolios. But some data showed that these approaches limited financial returns.
Today, we’re in the realm of ESG, or Environment, Social, and Governance criteria. It’s also known as Responsible Investment and a host of other terms that make your head spin.
Here are three reasons why impact investing is hot right now:
1. More data now shows reduced risks and potential financial outperformance
As you’ve heard before…
"In God we trust, all others must bring data." (Edwards Deming, the father of modern quality management)
Investors, analysts, and fiduciaries need good data to make informed investment decisions.
Here are trusted sources of the increasing body of evidence linking ESG, in its various forms, to reduce risks and achieve equal or better financial returns.
(Note that many would consider impact investing to be different from ESG investing.)
Examples in this category abound. Consider just two:
The CDP (fka, Carbon Disclosure Project) represents 500+ investors managing $95+ trillion in assets, and asks the world’s largest 7,000 companies each year what they’re doing regarding climate change risks and opportunities (learn more).
The Investor Agenda represents 450+ investors representing$34+ trillion in assets under management, and encourages the world’s governments to be more aggressive in addressing climate change (learn more).
Which ones feel like “blah, blah, blah,” running together with lots of other lofty corporate speak?
On the other hand, which might really motivate employees to get out of bed excited to come to work on purpose?
Which ones allow you to know if you’re making progress towards your goal?
Here are a few that caught my eye:
Back to the Roots – We’re on a mission to make food personal again and inspire families to ask “Where does my food come from?”
Conscious Brands – To help support the transition of 1,000 brands from the old economy to the new economy by 2020
CSRHub – To foster access to sustainability and corporate social responsibility (CSR) information. We aim to be an engine of transparency that encourages more consistent and actionable disclosure from all types of organizations.
Futurepreneur – To play an integral role in the entrepreneurship experience of Canadians 18-39 by providing financing, mentoring and tools that will help them build sustainable businesses and create value.
Green City Growers – Green City Growers transforms unused space into thriving urban farms, providing our clients with immediate access to nutritious food, while revitalizing city landscapes and inspiring self-sufficiency.
IceStone – To transform waste glass into something beautiful while taking care of our employees and the planet at the same time.
Plum Organics – Plum’s mission is to get the very best food to little ones from the very first bite. And we mean all little ones.
As Entrepreneurs for Impact, what does this mean?
Know exactly what you’re after. Find and communicate the “why” of your business. Don’t get lumped into the rest of the pack. There’s only one you. Own “your crazy” (good intentions).
Lest I begin to feel like your mother, I’ll stop there.
We’d like to believe that we as company creators and leaders are not flawed. But au contraire.
In this article from Inc.com, Martin Zwilling notes that most founders are wrong to say that lack of cash was the reason that their businesses failed. Instead, he points to six common challenges associated with “Founderitis.”
Here’s my summary.
To be Entrepreneurs for Impact that avoid the pitfalls of others, read closely. :)
#1 - Setting arbitrary goals without team input.
No founder has a crystal ball. Nor will she be doing all the execution. So, get the team buy in and crowdsource input from all those smart and motivated people that you hired.
#2 - Team leaders and advisors picked as “yes” men.
We all like to be surrounded by friends. But when creating and growing a company, we don’t just need cheerleaders. We also need devil’s advocates and constructive critics who have the company’s success as their priority, not soothing the founder’s egos.
#3 - Vomiting on “processes” to avoid “bureaucracy”
Very few people love the excess forms, meetings, steps, etc. that are associated with large organizations such as corporations or governments. However, some level of systems, planning, and checks and balances is the foundation of a well-run business. Managing purely by “gut feelings,” anecdotal evidence, and fire drills is often flawed and exhausting.
#4 - Regular team meetings are a roller coaster ride
Instead of status reports and realigning on near term action items, meetings go too deep into single items (to the exclusion of many other topics that need attention) or go too high (emotionally) urging the team to “really be committed” and push harder (which can’t last forever).
#5 - “I’m right” versus “What’s right?”
As founders, we are only human. As such, when someone criticizes our business decisions or the progress of our company, it may sound like they are “calling our baby ugly.” But unless you’ve picked some terrible human beings as advisors and co-creators, then their criticisms are likely meant to improve the business’s chances for success. So, it’s time to get a thicker skin, shut up, and start listening more.
#6 - Paranoia and frustration take over
Launching and running a business is hard. But when times get tough, assuming the worst from people and prospects is no way to right the ship. Instead, this tends to make matters worse and conform reality to match negative self-talk.
So, be honest…Do any of those describe you?
They certainly described me at various points on my path.
If so, don’t worry. There is a solution.
Stop doing them.
Your team, investors, and customers will thank you.
What can I say? I have two boys who keep my head in the gutter sometimes. Luckily, our little girl balances out their crudeness to some degree.
What we’re actually talking about here is the conversion of excess solar and wind power into renewable natural gas via ancient microbes called a methanogenic archaea.
That’s a mouthful, so let’s unpack that.
When the sun shines bright or the wind blows strong in states with a high penetration of renewable energy, that supply of clean electricity often exceeds the instantaneous demand from homeowners and businesses.
As such, it is often curtailed, or not brought onto the grid. It is wasted. (Gulp.)
There are ways to store it today. Pumped hydro, lithium-ion batteries, or longer distance transmission lines. But all of those pose challenges from a siting, cost, or timeline perspective.
Enter methane-producing bacteria that have been around for more than a billion years. (Drop the mic.)
After multiple years of partnership among Southern California Gas, the National Renewable Energy Laboratory (NREL), and Electrochaea, a German startup bringing these bacteria to the private sector, a large-scale bioreactor has been built, and this technology is progressing towards commercialization.
As for the actual process, the solar or wind power will be used to run a low-temperature water electrolyzer to produce (“strip”) hydrogen from water. Then this hydrogen is fed to the bacteria which mix it with carbon dioxide in a wondrous chemical alchemy to produce methane, which can be purified and fed into natural gas pipelines.
So, why might this matter to Entrepreneurs for Impact?
First, it’s freaking cool. It reminds me of the spirit behind the science media company I Fucking Love Science, which for some reason changed its name to IFL Science!
Second, it’s a reminder of the need to be multidisciplinary, whether that’s training yourself to be “fluent” in various fields, or achieving that goal by building a diverse team. To the topic at hand, it’s unlikely that a team of only electrical engineers could have come up with this “engineering meets biology” innovation.
Third, it’s a great example of orthogonal thinking à la Peter Diamandis (physician, author, and founder of the XPRIZE Foundation), which can be described as harnessing ideas from many spheres to create unexpected solutions. Or similarly, think of it as synthetic thinking à la Peter Drucker (father of modern management), which can be described as drawing from many seemingly unrelated fields to solve complex challenges.
At one point in time, I thought biomimicry was going to be the focus of my life’s work.
It tied together my love of the outdoors, my training in environmental science, my work in real estate, and my passion to solve big problems.
As a graduate student, I was able to bring the two global leaders in biomimicry — Janine Benyus and Dayna Baumeister — to Raleigh, North Carolina, for a week-long, intensive Biomimicry at the Design Table workshop.
While my path turned more towards entrepreneurship and finance, I remain a huge fan and promoter of biomimicry solutions and their related business opportunities.
First, what is biomimicry?
The Biomimicry Institute defines it as follows:
“An approach to innovation that seeks sustainable solutions to human challenges by emulating nature’s time-tested patterns and strategies.”
OK, let’s make this real and tangible. Here are some examples:
Wind turbine blades made to match the fins of humpback whales in order to produce more wind power at lower wind speeds
Commercial office buildings designed with no air conditioning systems by mimicking the design of termite mounds’ use of thermal massing and natural ventilation
Japanese shinkansen bullet trains reconfigured to reduce noise pollution (“thunder claps”) by following the designs of kingfisher birds' aerodynamic beaks
Tsunami warning systems created based on the efficiency of dolphin communication systems (aka, “unique frequency-modulating acoustics”)
Super strong, yet flexible, steel substitutes made like spider webs
Who’s putting biomimicry to work in the “real world”?
And dozens of others
What does this mean for Entrepreneurs for Impact?
Perhaps your next business idea could come from the natural world. And the scientists and engineers who are most expert in the opportunity might just need the help of startup, marketing, operations, and finance professionals who know how to build and run businesses.
Second, can a sugary drink company join the cool club in town...the one for leaders in environmental and social sustainability?
A green bond is basically a form of debt whose proceeds are used to fund some environmentally friendly project, such as more energy efficient buildings, light rail systems, or renewable energy system construction.
In Pepsi’s case, the use of these funds includes “eco-friendly plastics and packaging, cleaner transportation,” and other business improvements that are aligned with the United Nations' Sustainable Development Goals (SDGs).
According to Bloomberg NEF, the issuance of green bonds globally was up about 40% during the first half of 2019 versus the last half of 2018.
Barron’s estimates that the issuance of green bonds will hit $250B this year, as more institutional investors seek “green” investment products across all asset classes.
But that $250B is a drop in the bucket relative to the nearly $6T global bond market. So, just in case you thought green bonds were the new popular kids in school, think again.
OK, now before you as Entrepreneurs in Impact get excited about using green bonds to grow your company, hit the pause button. For now, these are mostly only issued by the world’s largest companies or financial institutions.
But they are an indication of growing mainstream investor interest in energy and environmental business opportunities.
OK, to the second part of this microblog…
Can a company whose main products are sugary drinks and potato chips — “enjoyed by consumers more than one billion times a day in more than 200 countries and territories around the world” — be counted as a “company for good”?
In a purist sense, the answer might be no.
It’s too easy to shine the light on positive environmental activities while ignoring the negative health impacts from some of the company’s core business lines.
But in a more practical way, the answer could be yes.
As parts of the market still demand less than healthy food and beverage, some company has to meet their needs. And all the better that this company is choosing to reduce the environmental impacts of its water and plastic use, while slowly shifting to a more diversified product offering including healthier options.
Finally, if companies of this scale can move even 5% towards a better direction, their positive environmental and human health impacts could dwarf those of dozens of super awesome, but much smaller, B Corps.
Then 4-5 weeks later, the researchers asked them if they completed their goals, or were more than halfway towards their goal.
Below is a summary of the group’s approach to goal setting, and the percentage who were successful, on the two extremes.
Group 1 — 43%
Think about their goals.
Rate them as follows: “Difficulty, Importance, the extent to which they had the Skills & Resources to accomplish the goal, their Commitment and Motivation to the goal, whether or not they had Pursued this goal before and if so their Prior Success.”
Write down their goals.
Same rating as Group 1.
Write down action commitments towards their goals.
Same rating as Group 1 and 2.
Group 4 — 62%
Send their goals to a friend.
Same rating as Group 1, 2, and 3.
Group 5 — 76%
Send weekly progress reports to that same friend.
Same rating as Group 1, 2, 3, and 4.
Alright, Entrepreneurs for Impact, it’s time for us to…
Get out that journal, or better yet Microsoft Excel, or even better, Google Sheets.
Write down our goals.
Write down some action items for each.
Send them to a friend.
And send that friend regular (weekly) progress reports.
It was a Wall Street Journal Business Bestseller and Amazon Best Business Book.
I read it with gusto and sleep with the book every night, cuddling it close like a security blanket.
OK, not really, but it is near the top of the pile of business books by work area.
The big idea?
As The Economist put it, “Deep work is the killer app of the knowledge economy: It is only by concentrating intensely that you can master a difficult discipline or solve a demanding problem.”
And this skill is all the more important as more and more tasks become automated or outsourced to lower skilled (or lower paid) workers.
In one example, he tells the story of Carl Jung, the Swiss psychoanalyst who “founded analytical psychology” and spent months each year, seemingly chillin’ in at a lodge in the woods because he was so successful.
In contrast, Newport argues that because Jung spent months in deep work in the woods he was able to make major breakthroughs in psychology. That is, he was doing deep work.
My copy of the book is loaded with pen highlights of passages that I aim to remember and put into practice in my own work:
Blocking off 90+ minute chunks of time to go deep
Religious “calendar blocking” (with the occasional heresy of unplanned activity)
A old-fashioned preacher might tell you that it’s a sin to be wealthy.
But before I tell you why I think that’s wrong, let’s indulge in the ways a good Christian upbringing might ruin our entrepreneurial success.
“It is easier for a camel to go through the eye of a needle than for a rich person to enter the kingdom of God.”
“For you say, I am rich, I have prospered, and I need nothing, not realizing that you are wretched, pitiable, poor, blind, and naked.”
“Come now, you rich, weep and howl for the miseries that are coming upon you.”
Luckily, there are other perspectives on this, both from religion and secular society.
As this Wired article on impact entrepreneurship points out, successful entrepreneurs are often the ones best positioned to do more good in the world.
Consider Elon Musk and Richard Branson as examples.
Or how about the author of Harry Potter, J.K. Rowling.
She apparently lost her billionaire status, in part, because she gave so much money away. In her words, “You have a moral responsibility when you’ve been given far more than you need, to do wise things with it and give intelligently.”
It’s also worth noting that she has written three books for charity and raised $30 million in the process. Another great lesson: Once we achieve “master status” through deep work and deliberate practice, we are able to use these skills to make money explicitly for giving back, in addition to growing our core business.
For me, I also want to make lots of money (I hear some of you cringing) so that I can do fun things like…
Catalyze the planting of 100,000 new trees each year
Lift 100,000 people out of poverty by investing in microentrepreneurship
Reach 1,000,000 people per year with tips, tools, and templates for solving environmental problems through entrepreneurship and finance
Can the pursuit of wealth be a distraction from what really matters? Heck ya.
But if impact and wealth are aligned, then Entrepreneurs for Impact can create positive environmental and social benefits through their core business, and then do it over and over with the profits they earn.
These words come from today’s version of “Fonzie” or “The Fonz” (image below), a TV star from the late 1970s and 1980s.
Today, the actor Henry Winkler (bio), has moved on to more mature roles, and I heard this wisdom when he appeared on the hilarious podcast (and fantastic way to hear depressing news told via comedy) — Wait, Wait, Don’t Tell Me on NPR.
For Entrepreneurs for Impact, meditation can be a life- and work-hack that boosts our focus, endurance, resilience, insight, and kindness (hey, don’t knock it...this comes in handy when building strong customer relationships and internal team rapport).
On the podcast, Ariel Garten — neuroscientist, psychotherapist, and the co-founder of Muse, the brain sensing headband that helps you meditate — talks about the benefits of meditation described by over 1,000 studies.
Long-term meditation can increase the size and thickness of these parts of the brains, which often degrade as we age:
Pre-frontal Cortex – Our attention control center.
Amygdala – Emotions.
Hippocampus – Learning and memory.
Corpus Callosum – Bundle of nerves that connect your left and right brain hemisphere.
Temporal Parietal Junction – Compassion, empathy, and perspective changing.
This is a “free, online platform that evaluates how your company interacts with your workers, customers, community, and environment.”
You need to score at least 80 out of 200 points to be certified.
2. Meet the legal requirements.
As the B Corp website says…
“Certified B Corporations are legally required to consider the impact of their decisions on all their stakeholders. B Corps make this legal change by updating their articles of incorporation, reincorporating as benefit companies, or making other structural changes. The B Corp legal framework helps companies protect mission through capital raises and leadership changes and gives entrepreneurs and directors more flexibility when evaluating potential sale and liquidity options.”
Enter your state at this website and learn what your legal requirements would be.
3. Get verified by the B Lab staff
B Lab, which administers the certification, will review your B Impact Assessment, and shine a giant flashlight on your face, as you sit sweating in an abandoned warehouse, surrounded by total darkness, a full moon, and the growling of hungry werewolves.
Actually, it’s more like a phone call with people who share your vision of the world, sometimes followed by an audit on site to verify some information.
4. Pay the fees
Below are the fees you would pay, based on your company’s annual revenue.
$0 - <$150,000 = $1,000 $150,000 - $499,999 = $1,100 $700,000 - $999,999 = $1,300 $1 MM - <$1.4 MM = $1,400 $1.5 MM - <$1.9 MM = $1,600 $2 MM - <$2.9 MM = $1,800 $3 MM - $4.9 MM = $2,000 $5 MM - $7.4 MM = $2,500 $7.5 MM - $9.9 MM = $3,750 $10 MM - $14.9 MM = $6,000 $15 MM - $19.9 MM = $8,500 $20MM - <$29.9 MM = $12,000 $30 MM - <$49.9 MM = $16,000 $50 MM - $74.9 MM = $20,000 $75 MM - $99.9 MM = $25,500 $100 MM - <$174.9 MM = $30,000 $175 MM - 249.9 MM = $35,000 $250 MM - $499.9 MM = $40,000 $500 MM - $749.9 MM = $45,000 $750MM - $999.9 MM = $50,000 $1B+ Based on size and complexity of your business
Is that a lot?
Is it the only cost?
No. You also need to consider the following costs:
Opportunity cost — What else would your employees be doing (to increase revenue or impacts) if they weren’t collecting and analyzing data for B Corp certification?
Consultant’s costs — Will any outside expertise be required?
Legal costs — How much time will be required to amend corporate documents and filing with the secretary of state?
Alright, Entrepreneurs for Impact, is B Corp certification for you?
Probably no, if you are…
A super lean, very small team (e.g., 3-6 peeps)
A public company
Otherwise, if you have a team driven by impact and profit, it’s likely worth your time to at least take the B Impact Assessment (BIA) and see how you’d score and what you might learn to improve your company’s positive impacts.
If you want some validation, I can tell you that over 50,000 companies have already taken the BIA. So, you know, peer pressure and such...
In just 30 minutes, you can use the B Impact Assessment (free and confidential) to get a snapshot of how you might score on a B corp certification.
Heck, you could do it while enjoying that morning mug of keto-coffee, loaded with butter, heavy cream, coconut milk, stevia, vanilla, and supercharged blender action to get just the right amount of froth and clear headspace for you.
Impact on their workers, community, environment, and customers
Governance structure and accountability
It does so by focusing on two big buckets:
Operations, which covers a company's day-to-day activities
Impact Business Models, which awards additional points for business models designed to create additional positive impact
The five major sections include the following (from B Corp:
For Entrepreneurs for Impact, this all sounds like fair game. But what does it really mean?
Here are some sample questions:
What portion of your management is evaluated in writing on their performance with regard to corporate social and environmental targets?
Do you have a formal process to share financial information (except salary info) with its full-time employees?
Have you ensured that the social or environmental mission of your company will be maintained over time, regardless of company ownership?
What is the minimum number of vacation days / sick days / personal days / holidays offered annually to full-time tenured workers (tenured defined as with the company for greater of 2 years or life of the company)?
What % of the company is owned by full-time workers (excluding founders/executives)?
What % of management is from underrepresented populations? (This includes women, minority/previously excluded populations, people with disabilities, and/or individuals living in low-income communities.)
Are full-time employees explicitly allowed any of the following paid or non-paid time-off hours options for community service?
What % of energy used is from renewable on-site energy production for corporate facilities?
Which is the broadest community with whom your environmental reviews/audits are formally shared?
If this sounds hard, I hear you.
But consider the implications of being on the “wrong side” of the answers to questions like these in the years to come.
As a recent study put it, over 50% of the value of the world’s largest companies comes from intangibles, such as brand.
“Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.”
Society’s most challenging problems cannot be solved by government and nonprofits alone. The B Corp community works toward reduced inequality, lower levels of poverty, a healthier environment, stronger communities, and the creation of more high quality jobs with dignity and purpose. By harnessing the power of business, B Corps use profits and growth as a means to a greater end: positive impact for their employees, communities, and the environment.”
Founded in 2006, the movement is growing. Here’s a snapshot of the B Corp community:
3,038 certified companies
Some of the recognizable B Corps include these Entrepreneurs for Impact:
Ben & Jerry’s
Danone (North America)
New Belgium Brewing
New Resource Bank
Per the B Corp team, below are reasons that 3,000+ companies have chosen to obtain B Corp certification, with my comments attached:
Lead a movement — Because someone has to.
Build relationships — Because we prefer to do business with people we like and trust.
Attract talent — Because increasingly top talent wants to work at a place where the business does more than just make money.
Improve impact — Because it’s all about constant improvement, baby!
Amplify voice — Because there is power in numbers.
Protect mission — Because sometimes new investors or an acquirer can otherwise change a company’s culture and vision.
The next blog will cover the following:
How do you actually get B Corp certified?
How can you get all the Ben & Jerry’s ice cream you can eat?
How can you get all the sweet Patagonia outdoor gear that you want?
Are we the frogs in a pot of slowly boiling water?
Let’s hope not, but, as it relates to climate change, it’s been that way so far.
The United Nations indicates that we have 11 years left to implement pretty drastic changes to our globally energy and economic system if we are to prevent “irreversible damage from climate change,” aka, “climate disaster,” “climate catastrophe,” and other “I’ll haunt your dreams” kind of phrases.
For an illustration of these impacts, check out this sobering graphic (Source link):
What’s the goal?
To reduce 45% greenhouse gas emissions by 2030, compared to 2010 levels.
But some climate scientists suggest that we only have until 2020 (uh, next year) to make serious policy changes if we are to avoid these scenarios. The reason: Major changes in infrastructure and policy take many years to implement.
According to the most recent IPPC report (Intergovernmental Panel on Climate Change), global greenhouse gas emissions must peak in 2020 if we are to stay on track to limit average temperature rises by 2100 to 1.5 degrees Celsius (2.7 degrees Fahrenheit).
Currently, we’re on a trajectory to hit 3.0 degrees Celsius (5.4 degrees Fahrenheit).
Some say the number is more like 5.0 degrees Celsius (9.0 degrees Fahrenheit).
P.S. As a reminder, the UN IPCC is not a group of tree huggers working up a quick analysis. Instead, the effort is a 700-page report based on 6,000+ scientific publications, contributions from 133 authors, and peer reviews by 1,000+ scientists.
If you’re like me, you might think you live in a bubble, surrounded by the minority of people that understand or care about climate change.
But if you saw photos from around the world on September 20 for the Climate Strike, then you might be thinking something very different now. (photos here from Vox)
Some called it the largest climate protest in history. While hard to measure the exact numbers, I’d say, “Duh, of course it was.”
Until recently, this topic has largely lived in the stratosphere (ok, technically in the lower elevation troposphere, but you get the idea). It’s only now coming to a boiling point. (Yep, pun intended.)
When 4 million people in 163 countries show up at 2,500 events to bring attention to climate change, I start to see some glimmer of hope that we’ll implement solutions to this problem before things get too bad.
[I have no doubt that some percentage of these young people will become future Entrepreneurs for Impact.]
Persistence is a trait that entrepreneurs put on a pedestal. And rightfully so.
"I'm convinced that about half of what separates successful entrepreneurs from the non-successful ones is pure perseverance." -- Steve Jobs
"It's hard to beat a person who never gives up." -- Babe Ruth
"Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent." -- Calvin Coolidge
"Effort only fully releases its reward after a person refuses to quit." -- Napoleon Hill
"Continuous effort - not strength or intelligence - is the key to unlocking our potential." -- Winston Churchill
(Thanks to Inc.com for aggregating these quotes and others like them.)
But...there are times when you should NOT PERSIST.
For example, after many months…
You’re still developing a product that early prospects are not super excited about.
You’re still selling a product or service that prospects don’t need, but a few want.
You’re toiling over a business that has negative, zero, or minimal positive environmental or social benefits.
I can say this with great conviction because in one of my startups, I was persistent to the point of BEING STUPID.
I was certain that original idea that got me out of bed at 2:00am was going to succeed, come hell or high water. The hundreds of hours we had spent on product development were going to pay off. The improvements in environmentally conscious and profit-focused business decision making were going to happen. I was destined to be an Entrepreneur for Impact.
I still don’t know exactly where the line between persistence and stupidity is drawn.
But at least I know the line exists, and it can be crossed. Despite the inspiring comments above.
Going one step deeper, here are some excerpts, with my notes:
“Electricity demand is set to increase 62%, resulting in global generating capacity almost tripling between 2018 and 2050.” -- Billions of people with sub-par standards of living deserve more power. That’s not debatable. But if most of that power comes from sources that emit greenhouse gases, well, we’re toast.
“This will attract $13.3 trillion in new investment, of which wind will take $5.3 trillion and solar $4.2 trillion.” -- That means that 71% of all new projected investment in future power plants is likely to go to renewable energy. Wooh! That’s a relief. If it’s true…
“In addition to the spending on new generating plants, $840 billion will go to batteries and $11.4 trillion to grid expansion.” -- Oh wait, when the sun doesn’t shine or the wind doesn’t blow, we have no renewable energy output. And when those things happen at the wrong time (e.g., lots of wind at night when we’re all asleep using very little power), we have low to negative pricing for renewable energy, which makes the return on investment challenging. So, if #2 is true, then #3 also must be true.
As Entrepreneurs for Impact, this should be welcomed news for us. Reasons to remain optimistic...
But it requires the building of markets, supply chains, and customer awareness. Herein lie many new businesses yet to be created around the world.
If you’re like many entrepreneurs, you set business goals based on revenue targets.
You’re not alone. Consider the Inc. 5000 list, which ranks the fastest-growing companies in America. Its metric is percentage revenue growth, year over year.
And revenue-based targets are great, unless your costs are so high that you are losing money, or toiling away nights and weekends for a low single digit net profit margin.
Let’s level set.
While you as Entrepreneurs for Impact are running a business to make positive impacts in the world, you also need to make good money, or there is no business.
This is the truest definition of “sustainability.” While I teach graduate courses on this topic at Duke and UNC Chapel Hill, and corporate sustainability is a big driver of shareholder and stakeholder value, the literal definition is something like this: “Can you sustain what you’re doing for a long period of time?”
Whether it’s a business or the planet, this definition matters.
(Although I recognize that “sustainability” may not the best goal ever created. For example, would you aspire to define your relationship with your wife or kids as “sustainable.”)
Better than revenue targets, most businesses (aside from those targeting venture capital) should focus on profit margin, with the following prioritization:
Gross profit margin = Revenue minus ONLY the variable costs, or Cost of Goods Sold.
Operating profit margin = Revenue minus variable costs, or Cost of Goods Sold (COGS), and fixed costs, such as executive salaries, advertising, rent, and insurance (aka, the dirty “overhead” word).
Net profit margin = This is how you pay yourself (beyond a mere salary) and your shareholders.
As such, Company A with $1M in revenue but $300,000 in Net Profit may be more attractive than Company B with $5,000,000 in revenue but $100,000 in Net Profit. But the revenue numbers wouldn’t tell you that.
(Of course, net profit margin is just one of many variables that you’d use to decide which type of company you’d want to create, invest in, or buy.)